How Much Will the Proposed Tariffs Raise Prices for Americans?

New York, NY, March 3, 2025-"President Trump has imposed or threatened tariffs on a range of products and countries. How much more will consumers pay? The question is surprisingly hard to answer,” according to the Wall Street Journal.

“For example, a 10% tariff on shoes from China would raise their sticker price 4% or so, but on wine or olive oil from Italy, almost 10%.

“Why the difference? Tariffs aren’t the only factor at work. Currency changes, the availability of alternatives, and the pricing strategies of producers and importers all play a part. All of this affects ‘pass-through’-how much of a tariff reaches the consumer.

“The Wall Street Journal asked Moody’s, an economic-research firm, to model how various tariffs would affect prices of a range of household goods from different countries. The Journal then applied those effects to typical prices found online.

“The results offer an illustration-not a prediction-of how tariffs could ripple through to everyday prices.

“For this analysis, Moody’s has applied tariffs of 25% on imports from Mexico and Canada, in line with Trump’s announcement, and 10% on all others. Trump has already implemented an additional 10% tariff on China, and announced another additional 10% levy.

“‘There are so many different ways that tariffs flow through into prices and the economy,’ said Mark Zandi, Moody’s chief economist. ‘The knock-on effects are sometimes not intuitive.’

That range of alternatives is why the effect is even smaller when extended to household linen prices in general, at 0.8%. Consumers aren’t that fussy about where they come from or who makes them. The prices in stores for such commodity-like consumer goods aren’t prone to big swings from tariffs alone. The same would probably be true of clothes, spare parts and accessories for cars, and some common cosmetics.

“Higher prices on Italian wine don’t drive down consumption much; someone who loves a particular Chianti is reluctant to switch. Sellers are more likely to pass through the full 10% tariff, then, betting they won’t lose many customers as a result. A 10% tariff on a $21.99 bottle from Italy would boost its price almost the full 10%, to $24.08. But Italian wine is a niche product, accounting for a small share of total U.S. wine consumption, so the total impact on the price of all wine is a relatively small 0.3%.

“That said, this example illustrates how tariffs on one product can raise prices throughout that group. A Californian winemaker would probably nudge up her price as well, earning fatter profits. As long as her new, higher price is lower than the tariffed alternative, she might pick up some market share.

“The wine wholesaler also plays a role. Faced with a higher import bill for Italian wine thanks to new tariffs, the wholesaler might decide to raise prices for alternative wines in his warehouse to compensate for lost profit on the Italian bottles. Of course, he might decide to do the opposite and swallow the lost profit on the tariff, hoping to grab market share from competitors who instead pass on the price increase to consumers.

“Tariffs are most keenly felt when imported or domestic alternatives are unavailable, or the affected product commands a significant premium. Even if tariffs raise the price of the latest iPhone, Apple fans would probably still buy it.

“Videogame consoles and their software fall into a similar category. Videogaming is dominated by a handful of players, mainly Nintendo, Sony and Microsoft. Many of the physical game consoles are made in China, and gamers won’t just swap in another machine to keep playing. That gives producers and importers real power to jack up prices for consumers to offset the pain of tariffs. The Moody’s analysis suggests that nearly all of a 10% additional tariff on game consoles imported from China would be passed through to consumers, raising the price of a $500 machine to $548.

“Mexico is the top foreign supplier of passenger cars and sport-utility vehicles into the U.S., accounting for 23% of imports in 2024. Tariffs on Mexican-made cars would likely mean not just higher prices for vehicles shipped across the border, but on all cars as other manufacturers and dealers see a chance to eke out more profit while gaining market share.

“This same dynamic is likely to be felt across many products, such as home appliances. Washing machines were hit with tariffs in 2018, which researchers found led to an increase in the price not just of washing machines but dryers also. The two are typically bought together, and retailers saw an opportunity to earn more.

“The study also found that prices of domestically made, not just imported, washers rose, as manufacturers raised prices owing to higher labor costs and tariffs on imported parts, and to match price hikes on imported machines. Meanwhile, U.S. manufacturers expect tariffs on intermediate components, such as steel and aluminum, to also feed through to final prices. Those effects aren’t included in the Moody’s analysis here. But they are real.”